The traditional IRA concept was so brilliant that it spawned a few offspring. One of the more intriguing offshoots of the traditional IRA is known as the Roth IRA (named for its chief legislative sponsor, U.S. Senator William V. Roth, Jr.). Launched in the 1990s, it offers slightly different incentives for savings. The most immediate distinction from a traditional IRA is that you will not get to deduct your contributions to your Roth IRA on your income taxes. These contributions come from your after-tax dollars earned. Now, before you run the other way, consider the key distinctions for this instrument paid with after-tax dollars:

• You can keep investing in a Roth IRA as long as you are working.

• You do not ever have to make withdrawals, even at age 70½.

• The interest earned in your Roth IRA grows tax-free.

• Earnings can be withdrawn anytime from a Roth IRA after you have held the account for five years (beginning at age 59½ or after another qualifying event such as a disability or death).

The most appealing feature of a Roth IRA is that you never pay federal taxes on the earnings of the investment. When investing in your Roth, you cannot select any instruments that are tax-free anyway, such as municipal bonds. Stock funds or anything that would be subject to taxation in other accounts are the best choices for your Roth.

Like the traditional IRA, a Roth IRA is not an investment itself, but a type of custodial account in which you put your money. You have a range of choices of how to invest your Roth IRA dollars. You can choose among certificate of deposits (CDs), stocks, bonds, mutual funds, even real estate. Deciding how best to use a Roth IRA needs to be done in the overall context of your retirement planning.